Federal political reporter

The cost of Queensland Health's troubled employee payroll system will total at least $1.25 billion over an eight-year period, an audit has found.

Health Minister Lawrence Springborg today tabled a report of an independent KPMG audit into the payroll system, which caused tens of thousands of employees to receive incorrect payments after the new system was activated by the former Bligh government in 2010.

The KPMG report says it is expected the total cost of the payroll system will be $1.254 billion between the 2009/10 and 2016/17 financial years, although this includes operational costs such as salaries for payroll staff.

Of the total cost, $416.6 million will have been incurred to the end of the 2011/2012 financial year.

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The remaining $837 million is forecast to be spent over the following five financial years.

The report warns that the $1.25 billion “excludes any costs associated with the reimplementation or upgrade of the system, any contingencies associated with the implementation of system solutions, and additional [fringe benefit tax] costs that may arise from waiving overpayments rather than recovering them”.

Of the total expected costs, about $1 billion relates to payroll operations that has and will continue to ensure Queensland Health staff are paid on a fortnightly basis, the report says.

There were always going to be operational costs to run the payroll system each year, for example on salaries for payroll officers, but the audit shows costs had been expected to be about $60 million a year.

The expected operational costs over the eight years in question have blown out by $530 million, the report says.

Meanwhile, about $246 million is tied to fixing the key issues and undertaking a systems analysis to determine the longer term solution for the payroll system.

Mr Springborg said the report was “devastating” and the cost was likely to be even higher.

He has vowed to scrap a freeze on recovering overpayments from staff, look at moving the pay date to improve the accuracy of payments and remove the six-year window for staff to make claims for payment.

Mr Springborg's spokesman said the government would also consider options for going to market to ensure system improvements, including possible replacement of the system.

Voicing his anger about the saga, Mr Springborg told Parliament 1000 payroll workers were struggling to keep the system afloat.

“These hundreds of millions of dollars should be available today to help sick Queenslanders. Instead they are dollars wasted by the former government and marked for consumption by a sick payroll system.”

Mr Springborg said 56 per cent of the basic payroll operating cost was unfunded in Labor’s last budget.

“This report urges the government to make a targeted approach to the external market and adopt comprehensive procedures for due diligence and decision-making,” he said.

“It cites the extraordinary complexity of industrial awards in Queensland Health and shows how Labor’s centralised structure made the resulting problem worse.

“Today, there are 130 manual work-arounds; 570 issues require investigation and few release windows are available to correct them. Every fortnight about 200,000 manual transactions are required to file about 92,000 forms.”

Mr Springborg said the government had a strong obligation to recover some of the $91 million in overpayments in a compassionate way.

This follows his recent announcement he would lift the Labor-imposed freeze on seeking money back from overpaid workers.

The problems

According to the report, the Queensland Health payroll operating environment and broader context “is uniquely complex”.

The 85,000 staff members are employed across a range of professional occupations, often within a 24-hour, seven-day-a-week roster.

“Key features of the current industrial environment for QH are that employees are employed under two different Acts, are covered by 12 different industrial awards and are impacted by six different industrial agreements with over 200 separate allowances in operation across these awards and agreements,” the report says.

“This complexity is estimated to result in over 24,000 different pay combinations each fortnight.”

The report says a number of factors led to the problems with the March 2010 “go live” for the new system, including the failure to undertake a full parallel pay run.

The centralisation of payroll processing prior to the launch of the new system meant payroll officers were to be responsible for interpreting pay information without the benefit of local knowledge.

The audit also criticises a practice allowing Queensland Health staff to lodge claims for payment up to six years after the fact. The timing of the pay date also “requires line managers to estimate likely hours to be worked by staff for the final two days of any given pay period”.

“This approach invariably leads to discrepancies between actual hours worked and pay entitlements and has led to significant challenges in managing overpayments to staff,” the report says.

“The total dollar value of these overpayments is approximately $1.7 million per pay period and has been accruing at that rate since 2010.”

The business processes designed to deliver the payroll are “highly manual”, with approximately 200,000 manual processes are required to process on average 92,000 forms within the payroll hubs every fortnight.

This means about 500 additional payroll staff are required to complete the processes each fortnight, compared with the number required under the previous system.

The report spells out 17 recommendations, with four steps to be taken as a priority, including lifting the moratorium on recovery of overpayments and speeding up a change to the pay date to ensure more accurate transfers are made each fortnight.

Queensland Health should also reduce the window for lodging historical payroll forms, it says.

Another step would be to begin work on planning a system upgrade, including exploring the costs, benefits and risks of other payroll operating models and systems.

The report flows on from a Liberal National Party election promise to launch an audit into the health payroll system.

40 comments so far

We must be able to take legal action against the people or organisation that sold Labor this useless package. Additionally, the decision makers in Government need to be persued. Take money out of their pension, so that they suffer along with the rest of us.

Commenter

mike

Location

gold coast

Date and time

June 06, 2012, 3:25PM

The firm that provided the system is not responsible for the manual transactions required to process the payroll. I would suggest this is more a QH system/process issue. Certainly doesn't seem to have been built for efficiency if there is this number of manual transactions.

Since the credibility of this company is at stake, I suspect that they wanted to do more testing, perhaps including a full parallel test, but were probably told by the Minister or a Director, that they were going live at such and such a date regardless. Always better to be sure first, especially when it concerns payroll. BTW full parallel testing is expensive, time consuming and is rarely done in practice due to the usually incompatible nature of the two systems. That does not excuse insufficient and appropriately broad testing though, including a sample pay run to selected employees across the board as part of a trial.

I suspect the real reason will come out in a book some time, but if there was a case to answer by the supplier, I think there would already be an action against them. That should tell us all something smells!!!

Commenter

Pancho

Date and time

June 06, 2012, 4:47PM

Meanwhile, wards are being understaffed and patient care is being held together only by the efforts of those same overworked nurses. Stretching the waiting lists out longer by lowering bed numbers and slamming the door on expenditure for patient care and elective surgery, brings the time when something will snap ever closer. Perhaps it's happening right now... Yet it seems OK for millions of dollars to be spent in this manner. Mr Springborg - we already know it's "devastating". Instead of stating the obvious where are some positive actions? We don't pay you to tell us what we already know, that's what the last lot did, and little else except throw our good money after bad. Get off the blame game and just bloody fix it....

Commenter

Andrew

Location

Brisbane

Date and time

June 06, 2012, 3:29PM

It is strange isn't it ?

The Newman Premier doesn't sack Bligh's husband but keeps him there to sack and close down the department he is in charge of.

Sacks some ALP perceived high ranking bureaucrats and replaces them with LNP cronies.

And here is Larry the Health Minister so angry & disgusted and it is all directed at Bligh & Lucas who are no longer there ..... nothing about the bureaucrats that oversaw the deal.

Commenter

J. Fraser

Location

Queensland

Date and time

June 06, 2012, 8:22PM

J.Fraser you are the only one who can take such damning evidence of mismanagement by a former government (public servants included) and find that it's the fault of the LNP. Unbelievable.

Commenter

Anthony

Location

Brisbane

Date and time

June 07, 2012, 9:44AM

Have to hand it the Bligh Gov't. If mismanagement was an Olympic event they would have the Gold medal wrapped up.

Commenter

mh

Location

Brisbane

Date and time

June 06, 2012, 3:30PM

Why hasn't anyone focused on the prime cause of the screw up. The union negotiated payment in advance!The vast majority of the problems could be fixed if like every other worker - health workers were paid on the work done and not in anticipation of the work they might do. 1,000 people need to be employed to do all the manual adjustments. That is even before chasing people down for overpayments or if they have left employment and been paid already. No system can cope with that - it not just doubles the manhours in the pay run - it triples it.

Commenter

Ozemade

Location

Bardon

Date and time

June 06, 2012, 3:34PM

Uh Ozemade, I don't know where you got that idea, but we don't get paid in advance. We get paid for the previous fortnight that we have worked. I can't speak for all Qld health employees, but that is the case for nurses.

Commenter

Rebecca

Date and time

June 06, 2012, 5:32PM

Pumping `em up for the Great Big Gunnadunnit No Show?

Commenter

Geronimo

Location

Yippee Yi Yo

Date and time

June 06, 2012, 3:47PM

I have read many of your commentsacross numerous articles and I never really understand any of them. Why do your posts keep getting published? They are nonsensical gibberish at best (unless they are so cryptic that I can't understand them). Is it just me?